Court Finds in Favor of Investor at Trustee’s Sale Where Bank Foreclosed on Itself

Jan. 21, 2010 - PRLog -- ALAMEDA, Calif., Jan. 21, 2010 –  Jennifer Zollars, who purchased a home from U.S. Bank’s REO department at the same time another department within the bank was foreclosing on that home, has lost her bid to have a subsequent Trustee’s Sale set aside.  

U.S. Bank records show that the very same day Zollars’ grant deed from U.S. Bank was recorded, the bank also recorded the Notice of Trustee’s Sale based on an earlier deed of trust.  Stan Kahan, an investor in foreclosure properties for the last 30 years, bought the property at the subsequent foreclosure sale.  

Kahan was forced to file an eviction action against Zollars when she refused to move out.  Zollars then filed a complaint against Kahan, asserting she was the true owner of the property, because she wasn’t given adequate notice of the pending foreclosure by U.S. Bank.  The two claims were consolidated into one action, and a trial was held.  The Court ruled that Kahan’s ownership interest trumped Zollars’, because Kahan was a bona fide purchaser.

California law provides protection for a bidder at a foreclosure sale, especially upon delivery of a trustee’s deed after a non-judicial foreclosure sale.  But to get that protection, the bidder must be a “bona fide purchaser” – someone without notice of any defects in the trustee sale procedure.  Zollars claimed that Kahan was a “professional bidder” and thus he had an extra duty to inquire of any potential adverse claims, or he would lose the bona fide purchaser protections.

Hanson Law Firm’s Christopher Hanson, who represented Kahan during the weeks-long trial, said that Zollars’ claim raised interesting legal questions about the need for a bidder at a foreclosure sale to investigate every nuance of a foreclosure proceeding.  

“The court got it right,” Hanson said.  “Zollars and her attorneys tried to paint a picture of Kahan as some Snidely Whiplash kind of character.  That couldn’t be further from the truth.”

While noting that Zollars did nothing wrong when she bought the property, the Court noted that Kahan also did nothing wrong when he bought at the subsequent foreclosure sale, and that, legally, Kahan’s was the correct argument.

“We’ve represented many bidders at foreclosure sales,” said Hanson.  “Zollars’ claim was unique in that the title company that insured her purchase mounted a very aggressive case.  It simply refused to admit it had made a mistake when it reviewed the title to the property.”

The unique feature of the claims in the lawsuit was U.S. Bank’s activity.  After having already foreclosed on one deed of trust and taken ownership, U.S. Bank then started foreclosing on itself.  

“U.S. Bank never admitted that one hand didn’t know what the other was doing,” Hanson noted.

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About Hanson Law Firm, PC
Hanson Law Firm is a real estate focused law firm with decades of experience in the residential and commercial brokerage business. Founded by Christopher Hanson, a real estate risk management expert with 30+ years of experience as a practicing attorney and real estate broker, the firm’s team of attorneys has served as 1031 attorneys, general counsel for mortgage companies, risk managers for large brokerage companies and as an associate dean of a law school. Hanson Law Firm’s focus is in providing real estate brokerage and business management advisory services, including its Risk Management Program. HLF also offers assistance with DRE compliance, acts as independent E&O defense counsel, provides real estate broker continuing education, assures corporate formation and regulatory compliance, and represents brokers/agents in litigation. The firm has offices in Alameda, Sacramento and San Jose, California. For more information, visit www.hansonlawfirm.com.